KeyBanc Capital Markets Downgrades ATI Inc. and Howmet Aerospace

KeyBanc Capital Markets downgraded ATI Inc. and Howmet Aerospace from Overweight to Sector Weight on Thursday, highlighting slowing order rates and inventory accumulation in the aerospace sector.

The downgrades follow KeyBanc’s recent assessment from its proprietary Q3 2024 Plane Chain survey of aerospace suppliers.

> “We are adjusting our expectations for aero-centric suppliers under coverage to reflect slowing order rates and the onset of inventory accumulation after nearly unabated positive momentum over the last three years,” stated KeyBanc.

The firm noted that ongoing uncertainty at Boeing (NYSE:BA) adds further risk to the outlook. Consequently, KeyBanc has reduced its near-term EPS expectations for several aerospace companies.

Since KeyBanc’s upgrade in 2018, ATI shares have increased 145%, while the iShares U.S. Aerospace & Defense ETF (ITA) has seen a 52% gain in the same timeframe.

In contrast, Howmet Aerospace (HWM) shares have risen 262% since their upgrade in 2021, significantly exceeding the 55% uptick of the ITA. Despite these impressive performances, KeyBanc believes the current conditions warrant the shift of both stocks to Sector Weight.

On a positive note, KeyBanc remains optimistic about the aerospace aftermarket and the resilience within the space and defense sector.

The firm has maintained its Overweight ratings on TransDigm Group and Rocket Lab USA, increasing price targets for both companies.

> “We remain confident in prolonged tightness within the A&D aftermarket and strength within Space and Defense,” KeyBanc added.

KeyBanc raised its price target for TransDigm Group (TDG) to $1,500 and Rocket Lab (RKLB) to $12. The firm sees both companies as well-positioned to capitalize on their respective markets.